Re-examining inequality persistence

Although it is not a new phenomenon, in recent years inequality has moved to the top of the political agenda given the concern that will result in political instability and social resentment. Persistence in inequality can further undermine economic growth and development by hindering educational opportunities, human capital formation, and intergenerational mobility. The persistent nature of inequality stands as one of the most serious challenges for the global economy. This paper analyses inequality persistence for a sample of 60 countries from 1984 to 2015. The authors conclude that inequality is persistent and government redistribution polices through taxes and transfers did not significantly reduce inequality persistence

Credit conditions and tenure choice: A cross-country examination [on housing market]. ESRI WP582, December 2017

An understanding of the house price to rent ratio and its determinants is important in assessing housing market developments and tenure choice therein. While the ratio is most usually explained by the user cost of capital, the influence of credit conditions on it has been added to econometric assessments in recent years. Using a new cross-country panel, we estimate the impact of variations in credit conditions on the house price to rent ratio between 1994 and 2015 on both a panel and country-by-country basis. This period was one of substantial cross-country house price movements as developments in standard explanatory variables, such as income levels, interest rates and demographics, were accompanied by major changes in credit markets. In line with other recent studies, our results establish the relevance of credit conditions to the house price to rent ratio at both panel and country levels. Moreover, the evidence points to credit conditions dominating the user cost of capital over the sample period, emphasising the need to include credit analysis when evaluating housing market developments

Monitoring Processes with Changing Variances

Statistical process control (SPC) has evolved beyond its classical applications in manufacturing to monitoring economic and social phenomena. This extension requires consideration of autocorrelated and possibly non-stationary time series. Less attention has been paid to the possibility that the variance of the process may also change over time. In this paper we use the innovations state space modeling framework to develop conditionally heteroscedastic models. We provide examples to show that the incorrect use of homoscedastic models may lead to erroneous decisions about the nature of the process. The framework is extended to include counts data, when we also introduce a new type of chart, the P-value chart, to accommodate the changes in distributional form from one period to the next.control charts, count data, GARCH, heteroscedasticity, innovations, state space, statistical process control

Monitoring Processes with Changing Variances

Statistical process control (SPC) has evolved beyond its classical applications in manufacturing to monitoring economic and social phenomena. This extension requires consideration of autocorrelated and possibly non-stationary time series. Less attention has been paid to the possibility that the variance of the process may also change over time. In this paper we use the innovations state space modeling framework to develop conditionally heteroscedastic models. We provide examples to show that the incorrect use of homoscedastic models may lead to erroneous decisions about the nature of the process. The framework is extended to include counts data, when we also introduce a new type of chart, the P-value chart, to accommodate the changes in distributional form from one period to the next.Control charts, count data, GARCH, heteroscedasticity, innovations, state space, statistical process control

Equity and bond flows to Asia and Latin America : the role of global and country factors

The authors investigate what has motivated the large portfolio flows to several developing countries in recent years. Using monthly data on U.S. capital flows to nine Latin American and nine Asian countries (instead of monthly reserves data), they analyze the behavior of bond and equity flows to those countries. Using panel data, they find that global factors - such as a drop in U.S. interest rates and the slowdown in U.S. industrial production - are important in explaining capital inflows. But country developments are at least as important in determining those flows, especially for Asia. They also find that equity flows are more sensitive than bond flows to global factors, but that bond flows are generally more sensitive to a country's credit rating and to the secondary market price of debt.Economic Theory&Research,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Macroeconomic Management

Unit Roots and Cointegration in Panels

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might prevail across the different units in the panel. In the analysis of cointegration the hypothesis testing and estimation problems are further complicated by the possibility of cross section cointegration which could arise if the unit roots in the different cross section units are due to common random walk components

The Changing Labour Force Participation of Canadians, 1969-96: Evidence from a Panel of Six Demographic Groups

Cyclical, policy changes, and structural factors have been put forward to explain the decline in labour force participation in Canada in the 1990s. In the first article in the symposium, Pierre Fortin and Mario Fortin attempt to determine the relative importance of these three types of factors by estimating a participation rate equation where the independent variables are an index of job availability (the Help-Wanted Index), the real wage, the real minimum wage, an index of unemployment insurance generosity, real social assistance benefits, and a time trend to capture other structural influences. The equation is estimated for six demographic groups (men and women 15-24, 25-54 and 55 and over) over the 1969-96 period. They find that the drop in the aggregate participation rate in the 1990s was equally due to the three factors: poor macroeconomic conditions, policy changes in unemployment insurance and the minimum wage, and structural transformations. The explanatory power of the equations is found to be good for the younger and middle-age groups, but poor for the older groups. The equations show no significant shift over the 1990-96 sub-period, implying that the decline in the participation rate in the 1990s should not be attributed to a new structural relationship. In terms of the variables, the authors find that young people, and to a less extent, middle-aged persons, respond positively to cyclical variations in job opportunities, but older persons do not; minimum wages affect negatively the labour force participation of the younger age groups and middle-aged women; UI generosity affects positively only youth participation; and social assistance affects negatively the participation of middle-aged women. The authors use their equations to simulate the impact of changes in cyclical, policy, and structural variables on labour force participation of the six groups in the 1990-97 period. The model can account for 2.6 percentage points of the total 2.7 percentage point decline in the aggregate participation rate between 1989 and 1997. Reduced job availability was responsible for 37 per cent of the decline, increases in the real minimum wage 15 per cent, decreased UI generosity 19 per cent, falls in social assistance benefits made a 4 per cent negative contribution to the decline in participation, and structural factors accounting for the remaining 30 per cent of the decline. These structural factors included rising school attendance, the changing roles of men and women in society, the changing demand and supply of skills, the expansion of public pension plans, and the rising average age of the 55 and over group. The simulations explained quite well the evolution of labour force participation for all groups except older males. Perhaps surprisingly, none of the large decline in participation of this group was found to be due to reduced job availability. The finding that only about 40 per cent of the decline in labour force participation in the 1990s is cyclical has important implication for the path of potential output. The authors find that whatever the value of the non-accelerating inflation rate of unemployment (nairu), in a non-inflationary cyclical recovery, the participation rate is unlikely to rise more than 0.8 percentage points from the 1997 level of 64.8 per cent.Labour Force Participation, Labor Force Participation, Participation Rate, Labour Force Participation Rate, Labor Force Participation Rate, Canada, Output Gap, Potential Employment, Potential Output, Potential Growth, Forecast, Simulation

Interest rate reaction functions for the Euro area : evidence from panel data analysis

As of today, estimating interest rate reaction functions for the Euro Area is hampered by the short time span since the conduct of a single monetary policy. In this paper we circumvent the common use of aggregated data before 1999 by estimating interest rate reaction functions based on a panel including actual EMU Member States. We find that exploiting the cross-section dimen- sion of a multi-country panel and accounting for cross-country heterogeneity in advance of the single monetary policy pays off with regard to the estimated reaction functions' ability to describe actual interest rate dynamics. We retrieve a panel reaction function which is demonstrated to be a valuable tool for evaluating episodes of monetary policy since 1999. JEL - Klassifikation: E43 , E58 , C33Die Schätzung geldpolitischer Reaktionsfunktionen hat mit der Einführung einer gemeinsamen europäischen Geldpolitik erneut an Bedeutung gewonnen. Die empirische Ermittlung einer Zinsregel zur Beschreibung des geldpolitischen Handelns der Europäischen Zentralbank wird jedoch nach wie vor durch die geringe Anzahl von Beobachtungen für gesamteuropäische Zeitreihen seit 1999 erschwert. Üblicherweise wird diesem Problem durch die Verwendung aggregierter, "synthetischer" Zeitreihen vor 1999 begegnet. Dabei werden auf der Grundlage gewichteter Durchschnitte länderspezifischer Zeitreihen Reaktionsfunktionen geschätzt und deren Erklärungskraft für die Zinsentwicklung nach 1999 im Rahmen einer Out-of-Sample-Evaluation überprüft. Ziel dieses Papiers ist die Vorstellung eines Panel-Ansatzes zur Schätzung gesamteuropäischer Reaktionsfunktionen auf Grundlage von Länderdaten vor 1999. Im Gegensatz zur Verwendung aggregierter Zeitreihen erlaubt die Anwendung von Panel-Schätztechniken, Heterogenität zwischen den Ländern im Vorfeld einer gemeinsamen Geldpolitik zu berücksichtigen. Zudem ermöglicht der Panel-Ansatz, durch Ausnutzung der Querschnittsdimension den Schätzzeitraum auf die Zeit nach der Unterzeichnung des Maastrichter Vertrages zu beschränken. Im Gegensatz zu bisherigen Studien stützt sich die vorliegende Analyse somit nicht auf einen Zeitraum, in dem das geldpolitische Handeln in vielen europäischen Ländern durch den europäischen Wechselkursmechanismus weitgehend beschränkt war. Die Anwendung von Panel-Schätztechniken liefert plausible Reaktionsfunktionen, die gute Prognoseeigenschaften aufweisen. Insbesondere werden Fehlerkorrektur-Gleichungen ermittelt, die sich durch eine bessere Out-of-Sample Prognosegüte auszeichnen als alternative Reaktionsfunktionen, die auf Grundlage aggregierter Daten geschätzt wurden. Vor allem die Berücksichtigung heterogener Dynamik im Vorfeld der gemeinsamen Geldpolitik scheint die Prognoseeigenschaften dieser Gleichungen zu verbessern. An einem Beispiel wird der mögliche Einsatz der ermittelten Reaktionsfunktionen zur Analyse von geldpolitischem Handeln nach 1999 veranschaulicht

Statistical Problems and Solutions in Onomastic Research: Exemplified by a Comparison of Given Name Distributions in Germany throughout the 20th Century

The German Socio Economic Panel Study (SOEP) offers the rare opportunity to look at patterns of given names amongst a representative sample of more than 50,000 people born since 1900. This article develops an exemplary picture of typical frequency distributions for given names and their developments over time. In this paper, we first discuss the advantages and limitations of various data bases which have been widely used to study the distribution of given names. Second, we address the problem that name distributions are typically characterized by a "Large Number of Rare Events" (LNRE) zone. With regard to this, we focus our attention on the difficulties associated with comparing name distributions. Third, we apply some measures of the concentration of distributions from other lines of research (economics and computational linguistics). Finally, we stress the problem of the statistical significance of differences in name distributions based on samples.Given names, large number of rare events (LNRE), concentration of distributions, SOEP

Density Forecasting: A Survey

A density forecast of the realization of a random variable at some future time is an estimate of the probability distribution of the possible future values of that variable. This article presents a selective survey of applications of density forecasting in macroeconomics and finance, and discusses some issues concerning the production, presentation and evaluation of density forecasts.